Tip of the Day
By Stephanie Reagan
Late employee-deferral contributions and late loan repayments are a prohibited transaction. The DOL takes the late-contribution issue very seriously. The DOL ( and every person who can get on the internet!) is alerted to the plan's late contribution issue immediately after the Form 5500 is electronically filed due to a question in the Form 5500, Schedule H, Line 4(a).
Under the 4(a) disclosure, the DOL wants to know the amount of the aggregate late contributions and/or plan loan repayments, including the following information:
We have been told by a DOL agent in California that it is a strong possibility, since the DOL reviews data from the Form 5500 regularly, that they may audit the plan if the amounts of the late contributions are deemed significant and have either not been corrected or have been corrected outside the VFCP. If the plans have resolved the issue under VFCP, the plan will not be audited by the DOL for the late-contribution issue.
DOL plan audits are no picnic.
Commonly requested documents in a DOL audit include:
- Plan documents, including adoption agreements, plan amendments, SPDs and SMMs
- Forms 5500, related schedules and audit report
- Fidelity bond information
- Census data and payroll information
- Distribution forms
- Forms 1099
- Schedule of contributions received
- Summary Annual Reports
- Nondiscrimination testing results
- New employee packets
- Employee notices and disclosures
- Committee minutes
- Investment advisory reports and Investment Policy Statement
The Employee Retirement Income Security Act (ERISA) confers upon the DOL direct responsibility and authority to investigate fiduciary violations of Title I of ERISA. In accordance with that authority, Program 48 will be used to investigate violations involving ERISA, Title I, part 4, sections 402, "Establishment of plan," 403, "Establishment of trust," 404, "Fiduciary duties," 405, "Liability for breach of co-fiduciary", 406, "Prohibited Transactions," 409, "Liability for breach of fiduciary duty," and 410, "Exculpatory provisions; insurance."
Fiduciary Investigations Involving Health Plans
In recent speeches give by representatives of the DOL, they have stated that in order to get their audit paid for by the government resources allocated to enforce healthcare reform, they add to their audit a review of all of the group health plan documents and disclosures.
The penalties and assessments that a DOL audit could generate can be substantial. In ERISA 502, civil penalties are significant in themselves. They range from $100 per day per participant or beneficiary to $1,100 per day for not filing Form 5500 on time.
Code § 4980D imposes an excise tax for a group health plan's failure to comply with certain requirements contained in the Code. Specifically, the tax applies to the requirements in Chapter 100 of the Code, which includes Code § 9815, the provision that incorporates the PHSA mandates of health care reform. For single employer plans, this excise tax is imposed on the plan sponsor. Failure to comply with a PHSA mandate will potentially trigger an excise tax of $100 per day under the Code “with respect to each individual to whom such failure relates.”
The DOL is continuing to pursue its enforcement priorities regarding benefit plans, including a new emphasis on criminal enforcement of the requirements for deposit of employee contributions.
Criminal statute sections to be investigated include, but are not limited to, the following:
a. Title 18 U.S.C. § 664, "Theft or Embezzlement from Employee Benefit Plan"
b. Title 18 U.S.C. § 1027, " False Statements and Concealment of Facts in Relation to Documents Required by the Employee Retirement Income Security Act"
c. Title 18 U.S.C. § 1954, "Offer, Acceptance or Solicitation to Influence Operations of Employee Benefit Plans"
d. Title 29 U.S.C. § 1111, "Prohibition Against Certain Persons Holding Certain Positions" (ERISA Section 411)(1)
e. Title 29 U.S.C. § 1131 "Willful Violation of Title I, Part 1" (ERISA Section 501)
f. Title 29 U.S.C. § 1141 "Coercive Interference" (ERISA Section 511)
g. Title 18 U.S.C. § 669, “Theft or Embezzlement In Connection With Health Care”
h. Title 18 U.S.C. § 1035, “False Statements Relating To Health Care Matters”
i. Title 18 U.S.C. § 1347, “Health Care Fraud”;
j. Title 18 U.S.C. §1518, “Obstruction of Criminal Investigations of Health Care Offenses”
k. Other criminal statutes that may be violated in connection with employee benefit plan operations such as 18 U.S.C. § 1341, “Mail Fraud”; 18 U.S.C. § 1343, “Wire Fraud”; 18 U.S.C. § 1346, “Honest Services Fraud”; and 18 U.S.C. §371, “Conspiracy.”
It is a good idea to set up a proper system for deferral contributions and loan repayments in the future. The DOL takes a dim view of repeat offenders!
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